A Local Cable Company Has Its Rates Set at P

question 18

Multiple Choice

A local cable company has its rates set at P = $15 by a regulatory commission. Its current output is 10,000 households and its costs are as follows: ATC = $17; AVC = $14; and MC = $15. From this, we can tell that this is:

• A) a fair price, and the firm earns a normal profit.
• B) a fair price, and the firm earns an economic loss.
• C) marginal cost pricing, and the firm earns a normal profit.
• D) marginal cost pricing, and the firm earns an economic loss.

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Definitions:

World's Population

The total number of people currently living on Earth.

World's Output

The total production of goods and services by all countries and economies worldwide over a specified period of time.

Poorest 20 Percent

The segment of the population with the lowest income, representing the bottom quintile in the distribution of income or wealth.

World Income

The total income generated by individuals and entities across the globe.